The Department of Justice is investigating whether Visa Inc.
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according to people familiar with the competition practices in the debit card market.
The department’s antitrust department gathered information and asked if Visa, the largest U.S. card network, had limited merchants’ ability to conduct debit card transactions over card networks, which are often cheaper, people said. Many of the department’s questions focused on online debit card transactions, but investigators also asked about issues in the store, the people said.
The study highlights the important role of the so-called network fees that are invisible to consumers, which are profitable for card businesses, but a weight for merchants, who often pass the fees on to customers in the form of higher prices.
This is because antitrust enforcers in all administrations have focused on investigating digital activities in the market, including in the financial sector, and on investigating the business practices of dominant companies.
In the new investigation, the department is considering whether Visa’s practices allow it to illegally maintain a dominant market share, the people said.
A Visa spokesman declined to comment. The Department of Justice did not immediately comment.
Some of the people have investigated antitrust investigators, other than just the issue of debit cards. The department also inquired about Mastercard Inc.’s
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one of the people said that it plays a role in the debit card market and whether financial technology companies are true competitors with Visa and Mastercard.
A Mastercard spokesperson did not comment.
The people said the new civil investigation, launched in recent weeks, follows the investigation into Visa Department’s proposed acquisition of financial technology firm Plaid Inc. The department sued Visa in November over the Plaid agreement, claiming that the acquisition of Visa would allow it to illegally maintain a monopoly in online debiting, where the department said it has an approximately 70% market share.
Plaid was developing an innovative, cheaper payment technology that could be a threat to Visa, the government claimed. Visa misled the lawsuit, saying Plaid is not a competitor.
The companies dropped the deal in January, citing the possible length and complexity of the lawsuit.
How debit card transactions are managed is a long disputed issue between merchants and card companies. The Durbin amendment, which is part of the Dodd-Frank Act of 2010, requires merchants to have the ability to choose from at least two non-affiliated debit card networks to conduct transactions.
Merchants have been claiming for years that they are unable to send online debit card purchases over smaller networks, such as Shazam or NYCE, if Visa or Mastercard’s name appears on the front of a card. The merchants say that as a result, they often pay higher network fees compared to what they would pay to lesser known networks.
The Justice Department is seeking information on the financial incentives Visa offers to banks issuing cards on its network, according to one of the people familiar with the matter. It is being looked at whether the incentives encourage banks not to use other networks, the person said.
One of the people said that the DOJ also asked about the use of debit card routings related to newer payment methods. This includes when debit cards are used with mobile wallets like Apple Pay and separately when customers pay in the store by typing debit cards on payment terminals rather than inserting them.
Separately, the Federal Trade Commission investigated Visa and Mastercard over debit card routing. Senator Richard Durbin and Representative Peter Welch also raised the issue in a letter to the Federal Reserve last summer.
Write to AnnaMaria Andriotis at [email protected] and Brent Kendall at [email protected]
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